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Friday, July 11, 2014

E-COMMERCE, INDIA, RAILWAY

Interesting plan by railway. Also shows underlying logistics issues in being able to offer fast delivery service in India.

Ecommerce companies smell money in railway logistics support

Radhika P NairRadhika P Nair,ET Bureau | Jul 10, 2014, 06.38 PM IST

Ecommerce players have welcomed railway minister's move to set up logistics support for them, as it would offer them an alternative to the expensive air cargo that they now rely on for delivery.

Times of India

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Ecommerce players have welcomed railway minister Sadananda Gowda's move to set up logistics support for them, as it would offer them an alternative to the expensive air cargo that they now rely on for delivery.

In his first rail budget on Tuesday, the minister had said the railways would extend "logistic support to various ecommerce companies by providing designated pick-up centres at identified stations." Rail cargo could be up to 45% cheaper than air-cargo, according to distance and volume, as per industry estimates.

"The initiative is certainly a positive move forward for the ecommerce industry," said Rohit Bansal, cofounder of online marketplace Snapdeal. "The extension of this mode of transport to the ecommerce industry will further ascertain timely and faster delivery of orders to consumers." Bansal, whose firm is targeting sales of about Rs 6,000 crore this fiscal, said it would also lower costs, which meant that "customers can get their products at even better prices". The company's third-party logistics partners at present use airlines to transport 95% of Snapdeal's orders. The industry is waiting for clarity on what "pick up centres" mean.

"Will this be for end-customers to pick up or for ecommerce sites?" asked an ecommerce entrepreneur, who did not want to be identified.

But industry insiders said the initiative will help propel the $2.3 billion (Rs 13,760 crore) industry forward. "This is a strong recognition of the importance of the ecommerce industry's ability to provide value to consumers in India," said Samuel Thomas, Amazon India's director of transportation. The global ecommerce major launched India operations a little over a year ago.

So far, ecommerce companies did not use railways due to issues like delays and pilferage. "They could use a judicial mix of road-rail and air to improve fulfilment while reducing the cost of delivery," said Manish Saigal, managing director at advisory firm Alvarez and Marsal.

Companies have already begun discussing such possibilities. "We can set up a collections and returns centre at stations," said Praveen Sinha, cofounder of Delhi-based fashion portal Jabong. "We can consolidate orders and book as cargo on trains which could then be picked up directly."

Amazon India's Thomas said this will work well especially for daily train commuters "who can pick up their packages as soon as they deboard the trains at their regular stations." Dedicated ecommerce logistics companies are also planning fresh services for their e-tail clients.

"It will also help us offer a separate product offering to our clients, giving them an option of a cost-effective alternative of using the railways for transporting shipments between cities, though the delivery might be delayed by a day or two," said Sanjiv Kathuria, chief executive of logistics company DTDC's ecommerce arm DotZot.